Central banks’ new-old inflationary bias

Kenneth Rogoff  |  Harvard University  |  28 May 2024

Listening to central bankers, one would think that the recent bout of high inflation was merely an excusable post-pandemic forecasting error made under extreme uncertainty. But while this narrative now prevails in markets and the financial press, it presumes a level of central-bank independence that is simply unrealistic in today’s volatile economic and political environment. And even if central banks manage to get inflation back down to 2% in the foreseeable future, the likelihood of another inflationary surge within the next five to seven years has increased significantly.

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